2008 Annual report - Sappi

sappi //
US$ million 2008 2007
26. Contingent liabilities
Guarantees and suretyships 38 43
Other contingent liabilities 7 26
Included under guarantees and suretyships are bills of exchange where Sappi has guaranteed third party funding of payments
to Sappi for certain German accounts receivables.
Other contingent liabilities mainly relate to taxation queries to which certain group companies are subject. The decrease in
contingent liabilities reflects management’s revised estimate of losses which could arise from taxation queries to which certain
group companies are subject. These amounts have been recognised as current income tax liabilities.
The group is involved in various lawsuits and administrative proceedings. The relief sought in such lawsuits and proceedings
includes injunctions, damages and penalties. Although the final results in these suits and proceedings cannot be predicted
with certainty, it is the present opinion of management, after consulting with legal counsel, that they are not expected to have
a material effect on the group’s consolidated financial position, results of operations or cash flows.
27. Post-employment benefits – pensions
Defined contribution plans
The group operates eleven defined contribution retirement benefit schemes covering all qualifying employees. The assets of
the schemes are held separately from those of the group in funds under the control of trustees. In addition the group
participates in a country-wide union scheme open to eligible employees in South Africa.
The total cost charged to the income statement of US$23 million (September 2007: US$18 million, September 2006:
US$10 million) represents contributions payable to these schemes by the group based on the rates specified in the rules of
these schemes. As at September 2008, US$2 million (September 2007: nil, September 2006: nil) was due in respect of the
current reporting period that had not yet been paid over to the schemes.
Defined benefit plans
The group operates eight large defined benefit pension plans plus a number of smaller plans. This includes plans closed to
new entrants as well as plans closed for future accrual for existing members. Those plans, open to new entrants or future
accrual, cover all qualifying employees. Such plans have been established in accordance with applicable legal requirements,
customs and existing circumstances in each country. Benefits are generally based upon compensation and years of service.
In North America benefits are based on a ’multiplier’ and years of service for most schemes, which historically has increased
from time to time. With the exception of our German and Austrian plans (which are unfunded), the assets of these schemes
are held in separate trustee administered funds which are subject to varying statutory requirements in the particular countries
concerned. In terms of these requirements, periodic actuarial valuations of these funds are performed by independent
actuaries. As at September 2008, the number of active members in schemes is approximately 8,000.
Actuarial valuations of the European and North American funds are performed annually. An actuarial review is performed
annually for the South African and United Kingdom funds, with an actuarial valuation being performed on a tri-annual basis.
Group companies have no other significant post-employment benefit liabilities except for the following:
– health care benefits provided to persons in North America and in South Africa (refer note 28).
– jubilee (long service award schemes) provided in continental Europe and an early retirement plan in Belgium, totalling
$23 million (included within other non-current liabilities in note 21).
All obligations and assets were measured at the end of this financial year.
// 2008 Annual report
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